While the Business world is anything but repetitious, over the many years of industrialization and development, there has been one constant; the basic principles of making profit. The business model of most large companies pertain to certain incremental values that have been set in stone; purely because they have proven to have worked well for the business in that particular industry. Examples of this is how the business model of a telecommunications company focuses on customer retention and average revenue per user, Hospitals’ business plans will exemplify profit through the time taken for drugs to pass through the US food and Drug Association etc.
But if one were to take a deep look into the ‘Outlier’ theorem, we can identify a grave fallacy in the basic principles followed by incumbents. While an orthodox business model provides structure, it lacks a certain kind of immunity needed to protect itself from external threats; disruption. External disruption is a commodity holstered by the few upcoming start-ups who have gained fame and fortune in little over a year to few months’ time.
Uber overcame the permit system model for taxi’s and started a tangent business which threatens the longevity of Taxi Company’s all over the world.
Airbnb incapacitated the concept of procuring physical capital in the form of hotels or resorts, and instituted the concept of maximising capacity by utilising empty rooms or apartments.
The common factor between both Uber and Airbnb is that they targeted the core value of their respective sectors of business and turned it on its head.
And hence, through this we can assume that the way forward in terms of making profit, is to break the monotony of a conventional business model by locating its core principals and core structure, and completely overriding it; in essence creating a completely new business off of an old business.
Supporting links: http://www.mckinsey.com/insights/innovation/disrupting_beliefs_a_new_approach_to_business-model_innovation
